The $800 million Tivoli Village project at Alta Drive and Rampart Boulevard will have to carry the Las Vegas retail market this year, a commercial real estate analyst said Thursday.
Few retailers are showing interest in opening new stores in Las Vegas during a time of record unemployment and falling home prices, even though opportunity exists to buy or lease at cheaper prices, said Dave Dworkin, research director for Grubb & Ellis.
"It really seems like the bottom has hit and we can only go up from here," Dworkin said. "The majority of businesses that closed and lost the war … that’s kind of done. The ones that struggled and are still there have a chance of survival."
A lot of space is available for sale or lease that was previously too expensive for smaller retailers, plus there’s vacancy at more desirable shopping centers that were previously occupied, he said.
Colliers International reported retail vacancy of 10.6 percent in the fourth quarter, compared with 10.4 percent in the previous quarter and 8.8 percent in the year-ago quarter. Asking rent dropped to $1.55 a square foot from $1.58 in the third quarter and $1.72 in fourth quarter 2009.
CB Richard Ellis showed 11.3 percent retail vacancy, down from 12.3 percent at the end of 2009, and an asking lease rate of $1.85 a square foot, exactly the same as a year ago. Negotiated lease rates continue to be significantly lower than asking rates, CB Richard Ellis noted in its fourth-quarter market overview.
Net absorption — the difference between retail space built or vacated and space taken — turned positive at 62,240 square feet in the fourth quarter, which followed the office and industrial sectors in posting their first positive net absorption in two years, Colliers research director John Stater said.
"Southern Nevada’s retail market entered the recession late and initially appeared it would exit the recession behind the office and industrial markets," Stater said. "Now, however, retail is showing distinct signs of life, whether it’s the increase in retail employment over the past three quarters, the drop in distressed retail space experienced this quarter, or the gradual improvement in taxable sales over the past year."
Among the top fourth-quarter lease transactions reported by CB Richard Ellis were 15,000 square feet for Vegas Fitness at 3300 E. Flamingo Road; 6,000 square feet for Krazy Buffet at 3031 N. Rainbow Blvd.; and 4,500 square feet for Super 99 Center at 3131 N. Rainbow Blvd.
The vulnerable commercial real estate market has favored the tenant in recent years. They were in a powerful position to negotiate a new or existing lease at a reduced rate, said Dworkin of Grubb & Ellis.
He thinks lease rates will continue to drop slightly in the first half of the year.
"There’s still some wiggle room," he said. "You’ve got so much bank-owned property that competes with other space. They may lower the rates to get someone in there so they can flip (sell) it."
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